Canadians lack awareness about annuities

A majority of Canadians (62 per cent) are worried about outliving their retirement savings, however only a low percentage of Canadians say they are using or planning to use an annuity to ensure they have enough money in retirement, according to a survey by Ipsos for RBC Insurance.

The survey showed that despite using various financial tools for retirement savings such as RRSPs (45 per cent), cash savings (43 per cent), or TFSAs (39 per cent), 45 per cent of Canadians are still not confident that they will have enough money in retirement to afford the lifestyle they want. Only 12 per cent of respondents say they are using or planning to use an annuity to ensure they have enough money to lead their chosen lifestyle in retirement.

Predictable income stream

"An annuity provides a predictable income stream for as long as you live. They are particularly helpful if you have a certain amount of fixed expenses you want to cover throughout your retirement, and that way you can use your additional savings to fund those activities that are important to you," Jean Salvadore, Director, Wealth Insurance, RBC Insurance in a Jan. 23 announcement. "Yet, most Canadians are unaware of annuities and lack an understanding of the product, which can be the very reason why few are building them into their retirement plan."

Overall, the study gave Canadians aged 55 to 75 an average grade of C when given a short test on their knowledge of annuities. For example, while 91 per cent knew that they don't need to invest their entire retirement savings into an annuity, only 28 per cent knew that an annuity does not need to be managed once it has been purchased.